China’s biggest clampdown on malpractices in its securities industry kicked into higher gear this week with news that three of the nation’s largest brokerages are being investigated for alleged rule violations.
Citic Securities Co. and Guosen Securities Co. late Thursday announced probes by the securities regulator and Haitong Securities Co. confirmed Friday it was under investigation. Brokerage shares slumped and the Shanghai Composite Index fell 5.5 percent, the most since the depths of a summer stock rout.
The crackdown since the sell-off has ensnared executives and regulators, with restrictions imposed on short selling and the regulator on Fridayconfirming a ban on brokerages offering derivatives financing for stock trading. Adding to signs of upheaval, a Hong Kong-listed unit of a Chinese brokerage said this week that it had lost contact with its chief executive officer.
An initial hunt for culprits for China’s market slump appears to have evolved into a broader clean-up, said Paul Gillis, a professor at the Guanghua School of Management at Peking University. ‘It’s an important step in reforming capital markets to make sure that powerful insiders don’t have their fingers on the scale,’ Gillis said from Beijing on Friday. ‘The markets need to be fair in order to operate efficiently.’
Biggest Decline
The Bloomberg Intelligence China H-Share Institutional Brokerage index, which tracks seven Chinese brokerages listed in Hong Kong, slumped 4.9 percent on Friday after the latest announcements of probes, the biggest decline in three months.
This post was published at David Stockmans Contra Corner on November 30, 2015.
Recent Comments